American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model
American Economic Review
vol. 101,
no. 2, April 2011
(pp. 819–43)
Abstract
This paper provides the first experimental test of Edward Lazear's (1979) model of deferred compensation. We examine the relationship between firms' wage offers and workers' effort supply in a multi-period environment. If firms can ex ante commit to a wage schedule with deferred compensation, workers should respond by supplying sufficient effort to avoid dismissal. We contrast this full-commitment case to controls with no commitment and computer-generated wages in order to examine the roles of monetary incentives, social preferences, and reciprocity. Finally, we examine a setup without formal commitment, but where firms can build a reputation for paying deferred wages. (JEL D86, J22, J31, J33, J41)Citation
Huck, Steffen, Andrew J. Seltzer, and Brian Wallace. 2011. "Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model." American Economic Review, 101 (2): 819–43. DOI: 10.1257/aer.101.2.819Additional Materials
JEL Classification
- D86 Economics of Contract: Theory
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials
- J33 Compensation Packages; Payment Methods
- J41 Labor Contracts